SACRAMENTO — Troubling news for taxpayers and gamblers has developed on two fronts.

The state-run lottery has run out of luck with its in-state lotto and controversial participation in multistate Mega Millions, suffering a drought of big jackpots, and is being forced to cut allocations to schools — $136 million less than last year.

At the same time, a new study indicating taxpayers may be the biggest losers in the California gambling industry has also drawn the attention of lawmakers.

The benefit of government cuts of gambling revenues may be nearly outweighed by the costs of gaming-related woes, such as crimes by problem gamblers and caring for poor families torn apart by those afflicted with the disease, according to a California Research Bureau report.

The booming, $13 billion-plus business of gambling in California — from the lottery and Indian casinos to card rooms and horse racing — is under scrutiny by lawmakers, who believe the state is doing too little to ease the impacts.

“We have to figure out what is most important,” said Sen. Dean Florez, a Fresno-area Democrat who chairs the government committee that oversees gambling.

Lottery officials said the problem that’s hurting their operation and allocations of revenue to schools is puzzling — there just haven’t been any huge jackpots.

At an unusually fast pace, players have been nabbing Mega Millions and in-state Super Lotto prizes while they are still relatively small and before they can build up.

The lottery says it is going to have to cut back scratch-off ticket games because it can’t afford to pay the prizes. Retail outlets will make less in commission. And lottery officials are rethinking their overall strategy.

But effects go deeper — schools will receive less funding.

During the last half of 2006, there was an “unusual absence” or “drought” of large jackpots.

“Jackpot levels are out of the lottery’s control and have been significantly below average this year,” the Lottery Commission said in a statement.

The panel, largely due to drops in lotto game sales, lowered projected 2006-07 revenues by $400 million, from

$3.6 billion to $3.2 billion.

It’s the first such mid-year change in a decade and follows a record sales year in 2005-06 of nearly $3.6 billion.

At the outset of Mega Millions participation, there were jackpots of $170 million, $258 million and $315 million. But recently, there have been fewer attention-grabbing prizes.

As a result, public schools — which are required to get at least 34 percent of sales — will receive less too.

Education will get an estimated $1.13 billion — $136 million less than last year.

State Superintendent of Public Instruction Jack O’Connell says lottery funding provides only a small fraction of the education budget but that every dollar counts.

Occasional dips in lottery revenue mean trouble for some local districts that have been pressured into putting the fluctuating money flow into fixed teacher salaries, according to education officials.

The allocations are supposed to be used for instructional materials and other items that can easily be cut back.

Due to developments, the lottery is researching its games more intensely, such as the Saturday “Big Spin” TV show, and slashed its administrative spending reserve.

Meanwhile, at a Senate government committee hearing, lawmakers were handed a troubling California Research Bureau Report, ordered by the attorney general’s office, which regulates gambling.

The report found California’s efforts to deal with gambling-related problems is inadequate and underfunded.

It also suggested the government’s slice of revenue from gambling operations should be weighed against the true costs of the woes it causes.

— primarily those related to problem gamblers.

The report provides information for that comparison.

The government makes a few billion dollars a year — at best — on its cut of gambling revenues.

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